The View | Activists hedge funds actually good for investors

Activist hedge funds, on the whole, do good work, but the best results come from those with the deepest pockets.

A new study, looking at the performance of activists, who buy shares and then push companies to change strategy, shows continued strong results on interventions from 2008 through mid-2014.

Activists have fought many high profile battles recently with incumbent management, notably Nelson Peltz and his Trian Fund Management, which is currently seeking four board seats at DuPont.

The study found that the activist interventions generated an average abnormal extra return of 5.8 percentage points in the 21 day period around the day the holding was announced. That’s a great result, and is also in line with and tends to support findings in earlier studies which looked at activists up to 2008.

Interestingly, the most active activists hedge funds, those that were involved in the most situations, did not tend to outperform. Top activists, those whose interventions were largest in size, did outperform, turning in a 21 day outperformance of nearly 11 percentage points, more than double the respectable 5.22 percentage points of the rest of the sample.

"The market appears to anticipate the superior performance of these top hedge funds even before announcement of intervention," C.N.V Krishnan of Case Western Reserve, Frank Partnoy of the University of San Diego and Randall Thomas of Vanderbilt wrote in the study.